Magna International Inc.’s first-quarter revenue and profits fell as the coronavirus crisis had an estimated $1.1 billion impact on sales, the company said Thursday.
Magna, the world’s third-largest auto supplier by annual sales to automakers, joins several other major suppliers, including Aptiv, Adient and BorgWarner, in reporting quarterly earnings this week.
Revenue for the quarter fell 18 percent to $8.7 billion, with sales decreasing in each of Magna’s four segments.
Power and vision sales dropped 18 percent to $2.5 billion; seating sales fell 12 percent to $1.3 billion; body exteriors and structures sales fell 15 percent to $3.68 billion; and complete vehicles sales dropped 31 percent to $1.3 billion.
In addition to the decline in global light vehicle production, the company said lower sales reflected the divestiture of its fluid pressure and controls business at the end of the first quarter of 2019 and the weakening of foreign currencies against the U.S. dollar.
Net income fell 76 percent for the quarter to $261 million while adjusted earnings before interest and taxes dropped 44 percent to $403 million from last year’s period. The company said it estimates adjusted EBIT was hit by about $250 million due to the coronavirus pandemic.
Cash from operating activities rose 8 percent to $639 million, reflecting a drop in operating assets and liabilities due to the impact of COVID-19, Magna said.
“I am very pleased with the coordinated global response of the entire team to this significant disruption in our business. In coordination with our customers, suppliers, and health experts, we are now highly focused on the safe restart of production at a number of our facilities,” CEO Don Walker said in the statement. “I am confident the industry will recover from this crisis and that Magna is in a strong position going forward.”
At the start of this year, the Canadian parts giant signaled that it would scale back spending on the development of Level 4 and Level 5 autonomous vehicle technology, instead focusing on lower levels. In January, it ended a two-year partnership with Lyft, which was originally established to develop AV technology.
Magna shares were up 2.6 percent to $37.41 in early trading Thursday.
Coronavirus update
Like most major auto suppliers, Magna withdrew its full-year guidance due to the pandemic and said Thursday it is still unable to provide an outlook.
Many of its facilities had reduced or suspended operations due to the COVID-19 pandemic. Magna said its operations in China have generally resumed production, while its factories in Europe started returning to production in late April, and plants in North America are expected to return to production in stages beginning in mid-May.
In a conference call with investors and analysts Thursday, Magna executives said that its temporary layoffs were “inevitable” and that the company has concerns about restarting production in Mexico and Michigan.
Magna established a Smart Start Playbook that includes plant opening protocols, information for emergency management teams, facility assessments and cleaning measures. Other global auto suppliers have been sharing their return-to-work playbooks with customers and their own supply chains to expedite the restart.
“Although no material supplier to us has become bankrupt or insolvent as a result of the COVID-19 suspension of production, we have heightened our focus on the financial health of our supply base,” the company said.
Magna said it had a strong cash position of $1.26 billion, as well as term and operating lines of credit totalling $3.3 billion, of which $3.1 billion was unused and available as of March 31. The company said it took other steps in April to provide it with additional financing flexibility.
“As we’re coming into this time frame, cash conservation is top of mind for everybody in the industry,” Magna CFO Vince Galifi told Automotive News in April. We know this industry is going to come around and we want to be in a position to be able to launch those future programs efficiently.”
Magna ranks No. 3 on the Automotive News list of top 100 global suppliers, with worldwide sales to automakers of $40.8 billion in 2018.